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Tuesday, February 28, 2017

Declaring Victory over the rigged market

I'm declaring victory, because I've finally achieved what I couldn't have achieve in 2012. At that time the market was testing Dow 14,000, and threatened to break out to all time highs, and it wasn't until early 2013, when the market broke out, that I finally got bullish. This was about the time I came up with primary wave "(D)" theory, when most bears still believed that we were still in a dreadfully bearish primary wave (2). We've since taken out that P/D target - by nearly 2000 Dow points, and I'm now considering an alternate primary wave (3) target.

No one is more bearish than I am, but by simply following the trend, identifying key support, and measuring fear (or lack there of), I've avoided previous mistakes, and I hope to have achieved what every market technician strives for, consistency. Only time will tell, if I'm there yet.

I'm sure many bearish traders find themselves in the same position that I found myself in 2013, but this is all part of the learning experience. Never give up.

Over the past several years, I've learned to consider both sides of the trade. I chart everything, and several alternate outcomes at once, before determining which one is correct. Learning how to read the $VIX has a lot to do with it, but so does having a better feel for the market, and understanding that markets are cyclical, and this only comes from years of experience. Even though I'm certain the markets are rigged, I know the game. I plan to identify that game in a future vlog, but I can never seem to find the time....

You gotta trade the market you have, rather than the one you want.
There are times when it's better not to trade. If you find that you can't walk away, and always in a rush to make a trade, you're more of a gambler than a trader. How much money has been lost trading Oil as it continues to trade in a tight range over the past several months? Don't get stuck trading one thing. There's always a market somewhere else.

Finally you must separate emotion from your trade. Otherwise you're no different than the folks standing around a craps table, rooting for the come line, and headed for the next bust. I watch the market like a hawk sometimes, but other times I'll tune it out. Trading isn't supposed to be exciting.

Yesterday's tradeperform flawlessly (that's nothing), but I've remained mostly bullish ever since July, and even going back to the Feb 2016 low, where I was already calling for new all time highs, when most bears were looking forward to the next crash. Not a difficult call.

Even on election night when market futures were seen crashing... I called it, "a golden opportunity".

Most recently we're seeing the market run out of steam, and many charts have becoming toppy. That's not to say we can't take out the highs one more time (speaking intermediate term), and until we see more fear in the $VIX, I'm only expecting another pullback.

Until we see real downside momentum, and by momentum I'm talking about 500- 1000+ point down-days, well above $VIX 20; we're not in a bear market. Anything less than a full blown crash points to just another pullback in a bull market. Tops tend to be rounded, unless you're deep into a bear market, tops take time to form, and even the first leg down - in a bear market - is going to be bought like a pullback in a bull market. Until a bear market can be confirmed, or key support breaks, stay nimble; selling the rips, and buying the dips.

Momentum and acceleration is everything:
Momentum is the key to identifying Elloitt Wave's. Wave 3's (like wave C's) are typically strong, and extend further than expected. Knowing this makes it easy to identify where we are in the wave count. Wave 4 should chop sideways to down for a while, and that's what we're seeing.

Even today we see the market holding up quite well, and that's a tell. Feels like another pullback, right? My best guess is sub-minuette wave (b) of d, in a developing broadening triangle pattern.

Monday, February 27, 2017

Broader market continues to make new highs
I was ready to get bullish again, but I think we're looking at a false breakout (in a sub-minuette wave "d"), and I don't see any reason to chase this market, unless you're very nimble and trading short term charts (intra-day).

My short term forecast: Buy this morning, sell the rally, buy support in a couple days. Rally into March - in wave 5.

$SPX - Sell wave "d". If it breaks above my target, then sell it when it breaks back down below that level, as that would be seen as new support, and when support breaks you sell.

Dow is expected to breakout to a new high, after holding support last week, but I wouldn't be chasing stocks up here. Trust the S&P chart.

The Russell 2000 may already be leading a bear market, but it's too soon to confirm a reversal. Wait for the snap-back rally.

Biotech has lagged, and I'd be looking for a bullish trade there. Back to the top of the range. See the thin purple lines for the suspected wave 4 pattern (a sideways contracting triangle) in wave 4. We may not see much movement until Trump addresses the congress Tuesday night.

Oil continues to trade in the top of the range, but looks like it wants to take out the recent lows in a panic wave E.

$NATGAS - I like it around 2.58 at the end of the month. Maybe it rebounds with Oil around the same time?

$HUI Gold Bugs index

Gold miners still look like they want to rally, as the market sells off in a panic. Makes sense, right?

$Gold - Super bearish long term, but looks like it wants to go a little higher in the near term.

Thursday, February 23, 2017

I remain short term bearish, but raising my intermediate term (2 month) target. Still expecting a major correction longer term, but may not see that until after OPEX Monday April 17th.

$SPX Top of the broadening pattern raised to a 2400 target. Support 2325 - at the thin blue line, at the pink support lines. So I'm basically predicting that the market chops around in the top of this range, while the powers that be build some fat short positions. March is a big window dressing month, and then we have the Easter break, leading into April OPEX. We may see a sector rotation around the same time, but we're getting ahead of ourselves. Major tops are rounded - they take time.

There's a chance momentum carries us to the top of the pattern ahead of March OPEX, but I doubt that. We need to see a shakeout, accompanied by a good amount of bearishness first. imho

$SPX 5 min chart - I thought we might have seen a short term top yesterday, but we're only consolidating in a range. This could continue today. Seeing futures only up slightly.

Trend has been to squeeze the shorts into the weekend, and into the following mutual fund Monday. Timing depends on when the lower channel line is retested, and wave 5's tend to be slow movers (in this case minuete wave v of 3).

If the market breaks out at the open, the upper pink line becomes support. If we continue to trade flat, expect a break out tomorrow - Friday. Watch for an update from my twitter @3Xtraders

That's about all the time I have, but we're also watching gold miners, NatGas, and

money continues to flow into utilities as predicted last week.

#NATGAS - This is the weekly chart, but NATGAS ended on a doji reversal candle on Wed. Futures should be up, but I haven't had time to check.

Wednesday, February 22, 2017

To be honest, like most technicians, I've been hard pressed to find the absolute top on this market.
I've been wrong a couple times, and that's to be expected when trying to call tops; calling tops is always more difficult, than calling bottoms. But I haven't been all wrong either. Most recently getting bullish again going Friday's close. The main reason for that, is that the trend is not broken, and going into a long weekend, short sellers are bound to get squeezed, and Voila! I keep telling the bears not to sell into a holiday, but some folks have to learn the hard way.

The say, "the market can stay irrational longer than you can stay liquid", and that's true, but when the rallies over-extend I get anxious, and to add to my anxiety, my long term charts scare the bejesus out of me. The $VIX also remains off the most recent lows, so there is real fear in this market.

Speaking of fear: It finally occurred to me last week, that scared money is most likely exiting ahead of Brexit, and finding it's way into US markets. No doubt Trump policy has certain retail investors excited, but Trump policy is unlikely to have any affect on markets for some time. Are we pricing in corporate tax cuts, and deregulation? Perhaps, but if that's so, then we're going to sell the news. I think the market is looking for a reason to sell-off, but the market often climbs a wall of worry.

Digging deep this morning. Spent several hours updating charts, and running late on this update.

Banks have lead, and here's the trend. I don't like the fact that it's trading into the apex of a triangle, and the reversal could be swift. 3X financial bear $FAZ is in play.

The Trend on the Dow isn't broken, but I can't recommend chasing this. $TRAN leads the Dow, so I was taking a close look at that yesterday. It's struggling.

I haven't forgotten about NatGas, and my revised target - a few cents below 2.70 - is being tested this morning. Hopefully we don't see a washout below support like we saw in gold.

$Oil tried to break out, and if $WTI crude makes a new recent high - above 55.25 that becomes the stop hunt.

The $RUT may have made a new high, but it failed to break out of the top of the pattern (reveled last week).
Today's open looks like this on a 5 min chart.

$Gold miners pulled back to support, bounced out of the hole, and seen back-testing that breakout (new support) this morning. Fear trade?

A final note: I plan to unveil my long term, "charts of doom", to be published on stockcharts.com (public), before the end of the week.
Meanwhile here's just a taste... Major top on the banking index.

Thursday, February 16, 2017

Looking at the 5 min $SPX: I think we could consolidated here for a while, before retesting the highs next month, followed by a "sell in May and go away", scenario, sometime after the Easter break.

Nearing the end of wave 3. I like the 2330 (blue lines) target for wave a, of A, in a bullish down turned triangle in wave 4, but wave 4's are tough to predict. We'll see...

Seeing another sell signal on the EMA Envelope, but still waiting for a bearish candle. Wait for it, wait for it...

Speaking of hard to predict wave 4's; once we see the end of wave 5... I'm looking for a big correction. I've came up with this bullish view of the NASDAQ (below) just this morning.

Would mean this entire Trump rally is a head-fake in a running wave "B", and 4 years of lower corporate earnings, or lack of confidence, over the next 4 years. Expect a lot of wailing and gnashing of teeth from the financial news networks, and of course Trump will be blamed, but this is a natural correction after years of out of control government spending (by the Republicans and the Dems), and massive corporate, and consumer debt... but I digress.

I'm bearish gold miners, but I think there's a good chance we see a blow off top, tomorrow, on OPEX. I'd add to shorts there, or wait for support to break...
Gold Bugs index $HUI

Wednesday, February 15, 2017

Market makes a new high, after a little head-fake in the morning. I call it a "head-fake", because it wasn't until the upper blue trend line broke, that we saw the market head higher.

The 30 min Dow chart now becomes our stop hunt. Thinking we could see profit taking ahead of the long weekend. Not looking for a crash here, but a complicated sideways pattern in wave 4 (of 5), although the fist leg down should be a good trade. Key support remains 20,222

Looking at the $SPX
May already be in a correction if yesterdays head-fake is wave "b", in a running triangle. $VIX remains elevated - trading well above the 9.97 bottom. Fear that.

$RUT - Lower high, no momentum. This could be a case where new recent highs aren't a bullish indicator. Key support 1392.

There is the possibility of a crash, and Goldman Sachs is right when they say, "the market overshot".

$BKX - Looks like the banks overshot as well. Overshot to the downside in wave 4, and overshot in wave 5.

Overshot in stocks like Deere & Co - reports on Friday

Meanwhile - Biotech breaks out - lifts the NASDAQ

$SOX consolidates sideways

Could see a wave 3 crash in gold miners
$JNUG is the 3X junior minors bull. Be careful this one runs hot

Tuesday, February 14, 2017

Was going to call this update "Market tops out", in wave (iii), of iii, of 5. That's not a prediction, but what I'm seeing on the 30 min Dow chart below.

The broader market rallied, ahead of Yellen's testimony (today), which squeezed any retail short sellers who may have sold into Friday's close. Of course the bulls are going to pile on as usual.

Selling into a weekend, is always risky, because money is put to work on Mondays'. That's why we call it "mutual fund Monday". Sometimes you see capitulation on a Friday (in a bear market), and you're forced to make that call, but it's never comfortable selling into that kind of strength.

I don't see any other catalyst for yesterday's move higher, but one of my hard and fast ruled is, "never under-estimate the power of a wave 3". If memory serves you can find that quote in my free Elliott Wave Tutorial, linked in the side menu.

Dow broke the 5 min chart, and even took out the thin blue line on my 30 min chart, but reversed at my red line. Futures looked flat last I checked, but we could make another run at that red line, before reversing. Don't sweat the small stuff.

Alternatively you could call yesterday's rally the 3rd move up, so it must be wave 5 of 5, but you would probably be wrong. I'm still expecting consolidation in sub minuette wave (((iv))) of iii ahead of OPEX. These are tiny moves, but I'd at least expect to give back all of yesterday's gains, before retesting yesterday's highs in wave (((v))) of iii of 5, maybe on OPEX, or next week.

Oil sold off, which seemed to come as a surprise to some, and $SOX rallied, so I'm going to call yesterday's mostly correct, even though I tend to be pessimistic. Even when I get it 100% right I don't do the snoopy dance in my living room. I try to separate emotion from the trade.

This update could go on for 2 more pages, but the opening bell rings in 10 minutes.

Today traders will be watching Janet Yellen's testimony, and I think I'll even try to suffer through it.
If she says something stupid to sabotage the Trump administration, watch for Gold and REITS to tank. These 2 tern to move in lock step with interest rates.

$RMZ

If on the other hand Yellen goes the other way, downplaying any further interests rate hike, watch for banks to tank.

Take care, and watch for anything out of the normal, to be addressed in my twitter feed.
AA

Monday, February 13, 2017

The SPX took out Friday's revised (tweeted) target of 2317.50. Wave 5's can fall short of the previous highs (in wave 3), but truncated fifths are pretty rare. Nevertheless it's something you need to be aware of, so you're no left holding the bag, if the market reverses at a lower high.

Key support on the DOW becomes 20,200.

This week: Watch for markets to consolidate sideways, to down, in a triangle in wave iv of 5 (marked "4" on the chart below) I'd get aggressively short here ahead of OPEX, but only if you're nimble.

This week is OPEX, and next week is truncated thanks to presidents day. Perfect time to consolidate in wave 4, however it looks like $SOX wants to bounce back, after last weeks pullback. May also get a rally in $NatGas.

The $RUT led this rally, and as I've said before that's where you normally see the risk off trade begin. We haven't seen it, yet.
Short term support looks like 1387, and 1377.

$SOX pulled back further than expected. You may have been lucky enough to the top of the larger pattern, but the best time to sell is when support breaks, as we saw on $SOX last week. Expecting little pullback here, before $SOX rallies - into OPEX - back to the top of the larger pattern.

$INTC is one to watch in the Semiconductor space:

$TXN is another one to watch, or place short term bullish calls on. Could even see higher highs on this one in a few months.

Oil took out the target at the top of the range. I wouldn't be betting on a breakout any time soon.

Energy looks like it wants to break out above 602 resistance on the $DJUSEN. You can find the energy charts in the last update.

The $NYSE has traded into a contracting triangle. The same pattern I spotted on the $SPX on Friday, but that can be attributed to a throw-over (false breakout) in wave 5. That makes me nervous, and to add to that nervousness, the $VIX held the previous low.

In short: I'm short term bearish, long term bearish, intermediate term bullish.

Friday, February 10, 2017

The S&P fails to break out

The $SPX (S&P 500) is probably the most heavily charted index of all, and the $SPY ETF (which tracks the $SPX) has to be one of the most heavily traded funds in the world. Lately I've been charting the DOW, because it has lead this rally, but it's time to take a close look at the S&P.

The SPX stalled at the top of the smaller contracting triangle pattern (thin blue lines), and futures are flat, and that's not good.

The short term DOW chart looks like it broke out and until the rising channel breaks, the trend can continue, but will it?

The 30 min Dow:

The 5 min chart:

The Daily candlestick view doesn't look so good, and after charting the $SPX I'm bearish. Very bearish. Thinking yesterday's new high on the Dow was the end of our final wave 5.

There's nothing the powers that be would like more than to crash this economy on Trump's watch, and continue with their globalist plot - destroy America and expand global governance. "Order out of chaos", is their MO, and we're seeing it play out on a daily basis.

Energy saw a bounce, but SOX broke the 5 min. trend (ending down yesterday), so it looks like we may be seeing a sector rotation.

Support on $SOX is 962.32 (held yesterday). Still think it can make a new high in the 980's

Energy: Bought at key support

Energy also bounced out of the hole on a bullish hammer candlestick, at the 200 day...

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About Me

I use a hybrid blend of technical indicators; cyclicality, sentiment, chart patterns, and more, to analyze the current market environment and provide short and long term outlook. It was never my intention to become a market timer, let alone try to make a living at it! It just came naturally. In 2010 I became a Hall of Fame Author at stochcharts.com after calling the flash crash, the subsequent rebound, and the eventual bottoming of the market in July of that same year. I drew quite a following, and needed more room to write, so I started this blog. Someone suggested I add a PayPal button, and the rest is history. This has all been a great learning experience, and I am very grateful for the opportunity. Please follow me on Twitter for the latest charts and my continuing up to the minute market outlook.